Delhi District Court
Arbt.Ptn.No.944/2012: "Prabhakar Kr. ... vs N.C Vijai Ragavan" Dod: 18.05.2013 on 18 May, 2013
Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013
IN THE COURT OF VINOD YADAV: ADDL. DISTRICT JUDGEI:
SOUTHWEST DISTRICT: DWARKA COURTS: NEW DELHI
Arbitration Petition No.944/2012
In the matter of:
Shri Prabhakar Kumar Shaw,
S/o Late Shri Dular Chand,
R/o C29, First Floor, Gali No.2,
Sitapuri PartI Extension,
Dabri, New Delhi110 045.
.....Petitioner
(Through Shri B.N Shah, Advocate)
Versus
1. Shri N.C Vijai Ragavan,
Ld. Arbitrator,
2nd Floor, Thangam, New No.59 X Block,
5th Main Road, Anna Nagar,
Chennai600 042.
2. M/s Kotak Mahindra Bank Ltd.,
17th Floor, Ambadeep Building,
14K.G Marg, Connaught Place,
New Delhi110 075.
.....Respondents
(Through Shri Sourabh Leekha, Advocate for Respondent No.2)
18.05.2013:
J U D G M E N T:
This order shall dispose off a petition U/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act"), filed by the petitioner against respondent No.2. The arguments on this petition were heard at length on 09.05.2013 and matter was listed for orders today.
Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 1 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013
2. The facts of the case, as borne out from the record are that petitioner is a small time fruit seller and he earns his livelihood by selling fruits in front of PS Dabri, New Delhi. In December' 2006, one Sales Executive namely Shri Purshottam Singh from Respondent No.2, i.e, M/s Kotak Mahindra Bank Limited came to his Rehri and convinced him to take "Personal Loan" from Respondent No.2 bank and he also discussed about the Life Insurance Policy of Respondent No.
2. Pursuant to the petitioner agreeing to take Personal Loan, he was sanctioned Personal Loan of Rs.51,227/ (Rupees Fifty One Thousand Two Hundred Twenty Seven) and a sum of Rs.47,250/ (Rupees Forty Seven Thousand Two Hundred Fifty Only) was handed over to the petitioner by the said agent of Respondent No.2 through Cheque No. 075615, dated 28.12.2006, after deducting a sum of Rs.3,977/ (Rupees Three Thousand Nine Hundred Seventy Seven) as Process Fee charges. The aforesaid amount was agreed to be paid by the petitioner in 36 monthly installments of Rs.2,695/ (Rupees Two Thousand Six Hundred Ninety Five Only) each. Till the payment of 19 installments by the petitioner, everything went on smoothly and thereafter, the agent of Respondent No.2 started to collect the payment of installments in cash from the petitioner by executing receipts and as per the petitioner, he has already made payment of Rs.56,000/ to Respondent No.2, but despite his repeated requests, the agent of Respondent No.2 did not issue him the Statement of Account and further defaulted in issuing some receipts to him. The petitioner immediately sent representation to Respondent No.2 in this regard. Finding no response from Respondent No.2, he on 17.09.2009 approached the District Consumer Dispute Redressal Forum at Janakpuri, by filing a petition U/s 12 of the Consumers' Protection Act 1986, interalia seeking directions as under: Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 2 of 13
Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013
(i) Direction to opposite parties to adjust Rs.4,000/, which was taken by Mr.Purshottam Singh, DSA and Insurance amount without his consent which was extracted through EMI from his account;
(ii) Direction to opposite parties to stop Hitman/Musclemens of opposite Parties No.1 and 2 for torture and insult at his working place and residence;
(iii) Award Rs.1,70,000/ as compensation for his mental torture, agony, harassment caused to the him;
(iv) Award of Rs.25,000/ as cost of litigation, to and fro expenses, legal fees, which was actually incurred by him;
(v) Any other further relief as desirable in the interest of justice and circumstances of the case."
3. The Respondent No.2 was duly served in the said matter and counter affidavit was filed by on 18.05.2010, thereby denying the averments of the petitioner about the deficiency of service on part of Respondent No.2. The said petition is still pending disposal before the District Consumer Dispute Redressal Forum. In the meantime, on 20.01.2010, the petitioner received NonBailable Warrants from the court of Ld.Chief Judicial Magistrate, Jaipur, issued in a criminal complaint No. 1545/2009, U/s 138 Negotiable Instruments Act, filed by Respondent No.2 against the petitioner in respect of dishonor of a cheque of installment of Rs.2,659/, dated 28.11.2007. The said cheque had been taken by Respondent No.2 from the petitioner at the time of disbursing Personal Loan to him. The petitioner had to appear before Ld.Chief Judicial Magistrate, Jaipur and pay up the cheque amount. As per the petitioner, he had already paid the amount of said installment in cash to the representative of Respondent No.2 in cash, who had not issued any receipt to Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 3 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 him in this regard and the said fact had been brought to the knowledge of District Consumer Dispute Redressal Forum by the petitioner.
4. Thereafter, in the first week of September' 2011, the petitioner received a letter from Arbitrator, Respondent No.1, whereby it was communicated to him that he had entered into Reference in respect of a dispute raised by Respondent No.2 before him in Chennai, in pursuance to Loan Agreement, dated 28.12.2006. The petitioner immediately on 13.09.2011 sent reply to Respondent No.1, Arbitrator, interalia pointing it out to him that he was never informed about the appointment of Respondent No.1 as an Arbitrator in the matter; he did not receive copy of any Statement of Claim, filed by Respondent No.2 before him and further categorically stated that no part of cause of action ever arose in Chennai, therefore, Respondent No.1/Arbitrator did not have jurisdiction to enter the Reference and he categorically made clear that his consent was not obtained before appointing Respondent No.1 as an Arbitrator in the matter. He categorically pointed out the pendency of his petition before the District Consumer Dispute Redressal Forum as well as the illegal act of Respondent No.2 in making him to face criminal prosecution before the court of Ld.Chief Judicial Magistrate, Jaipur, Rajasthan.
5. Then to the shock and surprise of the petitioner, he on 22.05.2012 received notice of an Execution Petition, in respect of an Arbitration Award, passed by Respondent No.1 in Chennai against him, issued by the court of Ld.ACJ/ARC, Dwarka District Courts. From the perusal of the copy of Execution Petition received by the petitioner, he came to know that Respondent No.1 had passed Award on 24.11.2011, which was never served upon him by the said Arbitrator. Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 4 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013
6. By way of this petition U/s 34 of the Act, the petitioner has prayed for setting aside of the Arbitration Award, dated 24.11.2011.
7. The respondent No.2 has filed reply to this petition, interalia taking the ground of limitation as one of the grounds. This court, vide order dated 02.03.2013 had decided the issue of limitation, holding the same in favour of the petitioner on the ground that respondent No.2 had not sent signed copy of the Award dated 24.11.2011 to the petitioner.
8. The other grounds which have been taken by the respondent No.2 in opposing this petition are that the petitioner has committed fraud upon this court by filing various forged and fabricated receipts, in respect of which the respondent No. 2 has already filed a petition U/s 156 (3) Cr.P.C, which is pending in the court of Ld.Metropolitan Magistrate. The other grounds are that the Arbitrator having decided that he had the jurisdiction to enter into reference and passing Award is not open to review by this court; that this court cannot sit in appeal over the Award passed by the Arbitrator; that if more than one view is possible and the Arbitrator having chosen one particular view, this Award cannot be interfered with by this court. On merits, it has been stated that the petitioner is in the habit of obtaining loans from various banks and private financiers and not repaying the same and further that the officials of respondent No.2 had never refused to supply either the copy of the loan agreement or the statement of account to the petitioner in past. The facts regarding Respondent No.2 having filed criminal case U/s 138 Negotiable Instruments Act against the petitioner in the court of Ld.Judicial Magistrate, Jaipur have not been denied.
Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 5 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013
9. From the entire gamut of facts pleaded by both the parties, it is apparent that the loan agreement between the parties was to enure from 01.02.2007 till 01.01.2010 and by 26.08.2008, as per the petitioner, he had made payment of 19 installments, whereas as per respondent No.2, he had made payment of only 11.75 installments. It is further apparent that right from the beginning, the stand of petitioner has been that he had not been supplied the copy of loan agreement and he had not agreed for the venue of Arbitration to be in Chennai. His aforesaid stand is also apparent from the perusal of his complaint, filed before Consumer Court on 17.09.2009.
10. Ld. Counsel for the petitioner has very vehemently argued that copy of the loan agreement was never handed over by respondent No.2 to the petitioner and as such, the petitioner had no idea about Clause 11.16 thereof, to be dealing with the arbitration and interalia holding that both the parties had agreed, in case of dispute for redressal through arbitration at Chennai, by an Arbitrator appointed by respondent No.2. He has made reference to the documents of loan, filed by respondent No.2 on record, which show that the loan agreement was entered into between the parties at Delhi; the loan was to be repaid in Delhi and even the personal loan/guarantee agreement was entered into in Delhi and as such, no part of cause of action ever arose in Chennai and as such, the Arbitrator did not have jurisdiction to enter reference at the instance of respondent No.2 alone.
11. Per contra, Ld. Counsel for respondent No.2 has very vehemently argued that the loan agreement was entered into between the parties on 20.12.2006 and the petitioner for the first time made allegation about not having received the Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 6 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 copy of the same on 17.09.2009, i.e in his petition filed before the Consumer Court, which is not believable. It is further argued that petitioner has taken benefit of the loan agreement by accepting the loan and then he cannot turn around and say that he was not supplied the copy of loan agreement. Ld. Counsel for respondent No.2 has further emphasized that this court cannot rewrite the contract for the parties and interfere with Clause 11.16, which is arbitration clause.
12. Although, I see from the record that no part of cause of action arose in Chennai, however, for the present, I believe that the parties had agreed for place of arbitration to be at Chennai.
13. It is well settled that an Arbitrator derives his authority from the Arbitration Agreement. Arbitration is supposed to be an alternative dispute resolution mechanism, for which both the parties, with their free consent have to approach Arbitrator, rather then getting their disputes redressed through the process of Court. There has to be mutuality between the parties, at least for the purpose of appointment of an Arbitrator. There is nothing on record that Respondent No.2 had informed the petitioner about the appointment of Arbitrator at Chennai by it. Once, the Arbitrator had notice that his appointment had only been made by Respondent No.2, without the consent of the petitioner, before entering upon the reference and issuing notice to the parties or taking any steps in the arbitration proceedings, he should have ensured that the petitioner also gave his consent to his nomination as an Arbitrator. The Arbitrator derives no authority or jurisdiction to even issue notice to the parties, either to file their statement of claim or statement of defence/counter claim or to appear before him, till his appointment has been made strictly in terms Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 7 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 of the provisions of the Act. The fact that the petitioner had sent reply dated 13.09.2011 to Respondent No.1 to my mind makes no difference, keeping in view the express language of Section 16(2) of the Act, which permits the raising of plea that Arbitral Tribunal did not have jurisdiction. In this case, the petitioner had categorically raised plea about the jurisdiction of the Arbitrator. Even then the Respondent No.1/Arbitrator continued with the Arbitration proceedings.
14. The Respondent No.1/Arbitrator neither appeared in this Court nor transmitted the original record of the arbitration proceedings to this Court. Only the said proceedings would have shown that he had sent a signed copy of the Arbitration Award to the parties. The Respondent No.2 has filed a copy of the Award on record which bears a postal receipt, addressed to petitioner. It has no where been established on record that the signed copy of the Award, as contemplated U/s 31 (5) of the Act was received by the petitioner. Even in the culminating paragraph of the Award, the Arbitrator has not specified that he was sending signed copy of the Award to the parties by post. Further, no Acknowledgment Card, showing receipt of the signed copy of the Award by the petitioner has been placed on record.
15. The first document with regard to initiation of arbitration proceedings by respondent No.2 is a copy of letter dated 20.06.2011, sent by it to the petitioner, interalia stating therein that a sum of Rs.83,247/ (Rupees Eighty Three Thousand Two Hundred Forty Seven Only) was outstanding against his loan account and if he did not pay up the same within three days of the receipt of that letter, then respondent No.2 would be free to initiate legal proceedings (civil & criminal) Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 8 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 against him for the recovery of said amount. Thereafter, on 25.08.2011, respondent No.2 sent letter to respondent No.1, thereby expressing its desire to appoint him as an arbitrator for adjudication of the dispute between the parties. A copy of this letter was probably sent to the petitioner, as is apparent from the postal receipts in this regard, but the petitioner has no where admitted having received the same. Strangely, without waiting for the response of the petitioner to this letter, on 26.08.2011 itself the statement of claim was filed before the respondent No.2, Arbitrator, presuming that the petitioner would have the knowledge thereof within one day of the sending of this letter. Letter dated 25.08.2011 nowhere suggests that copy of the statement of claim and other documents were sent to the petitioner. Accordingly, respondent No.2 has faulted at the first step itself, i.e the appointment of arbitrator. The respondent No.1, like an obedient servant of respondent No.2 immediately entered the reference and sent notice of the claim petition to the petitioner on 02.09.2011, without satisfying himself as to whether he had been appointed as an arbitrator with the consent of both the parties or not. The Hon'ble High Court of Delhi has come up very harshly on such Arbitrators. In this regard, reliance could be had to the judgment in OMP No.396/2011 (I.A.No.8432/2011), titled as, "Rajesh Batra V/s Randhir Singh Ahlawat", wherein in somewhat similar facts & circumstances, the Hon'ble High Court has been pleased to hold as under:
xxxxx "7. Having heard learned counsel for the parties as well as the learned arbitrator, I am of the view that the impugned award cannot be sustained and is liable to be set aside. The present is a shocking case where the arbitrator assumed jurisdiction without even caring to see that the parties had not appointed him mutually as required by the agreement.Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 9 of 13
Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013
8. It is well settled that an arbitrator derives his authority from the arbitration agreement. Once the arbitrator had noticed that his nomination had been only made by the respondent/claimant, without the consent of the petitioner, before entering upon the reference and issuing notice to the parties, or taking any steps in the arbitration proceedings, he should have ensured that the petitioner also gave his consent to his nomination as the arbitrator. The arbitrator derives no authority or jurisdiction to even issue notice to the parties, either to file their statement of claim, or statement of defence/counter claim, or to appear before him, till his appointment has been made strictly in terms of the arbitration agreement.
9. The fact that the petitioner had put in appearance on a couple of sittings before the socalled arbitrator, to my mind, makes no difference, keeping in view the express language of Section 16(2) of the Act which permits the raising of a plea that the arbitral tribunal does not have jurisdiction till the statement of defence has been filed. In this case, the petitioner had raised the said plea on 07.10.2010 and, O.M.P. 396/2011 Page 4 of 5 admittedly, no statement of claim had been filed by then.
10. Despite being put to notice that his appointment itself is without authority and jurisdiction, the arbitrator brazenly proceeded to conduct the proceedings and passed the impugned award. If such conduct is condoned, it will give encouragement to adoption of such sharp practices and fraudulent conduct. If the respondents stand were to be accepted, one or the other party can play havoc by nominating an arbitrator unilaterally in breach of the agreement, and obtain an award from the arbitrator, who may not command the confidence of both the parties. Accordingly, the impugned Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 10 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 award is patently illegal and has been made by the arbitrator without jurisdiction and the same is accordingly set aside.
11. The petitioner has been subjected to unnecessary harassment on account of the completely unjustified and illegal conduct of the respondent and the learned arbitrator. Accordingly, I subject the respondent and the learned arbitrator to costs of Rs.20,000/ to be shared equally by them. Costs be paid within a week."
xxxxx (underlining is mine for emphasis)
16. The Arbitrator did not stop here. When he received reply from the petitioner, dated 13.09.2011 to the effect that he had not received any claim petition and further questioned the jurisdiction of the Arbitrator in entering the reference, the Ld.Arbitrator proceeded with the matter without deciding the issue of jurisdiction raised by the petitioner. The Arbitrator should have gone into the loan agreement and other connected documents to satisfy himself as to where the cause of action arose and as to whether the petitioner was supplied the copy of loan agreement and claim petition or not. In this regard, the Hon'ble High Court in OMP No.253/2004, titled as, "Vijay Kumar Goel V/s Delhi Jal Board & Anr." has been pleased to set aside the Award of the Arbitrator in following terms:
xxxxx "5. The challenge to the impugned Award is on the ground that the learned Arbitrator has failed to deal with the application filed by the Petitioner challenging the jurisdiction of the learned Arbitrator. A perusal of the arbitral award shows that there indeed was such an application made by the Petitioner. It has, however, not been dealt with by the learned Arbitrator in the impugned Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 11 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 Award. Without dealing with the said objections, the learned Arbitrator dismissed all the claims of the Petitioner and allowed the counterclaim of the DJB to the extent of Rs. 16,99,556/. Even the issues framed by the learned Arbitrator overlook the fact that the Petitioner had filed an application questioning the jurisdiction of the learned Arbitrator. This by itself constitutes sufficient ground to set aside the impugned Award. It is not necessary therefore to examine the correctness of the impugned Award as regard the individual items of claims and counterclaims.
6. With the aforementioned observations, the impugned Award is set aside. The petition is allowed, but in the circumstances, with no order as to costs"
xxxxx (underlining is mine)
17. Therefore, the Ld.Arbitrator completely misconducted himself in this matter and acted on the absolute command of respondent No.2. The bias of the Arbitrator is further apparent from a bare perusal of the statement of account, filed by respondent No.2 before him, showing the outstanding amount against the petitioner to be Rs.23,814.91 Paise and the Arbitrator without going into the same, passed Award of Rs.83,247/ (Rupees Eighty Three Thousand Two Hundred Forty Seven) alongwith interest @ 18% per annum in favour of respondent No.2. The Award of the Arbitrator is further silent as to whether the Respondent No.2 company had authorized by way of any Resolution some authorized representative to file statement of claim before him. If the claim was filed by a person, who was not duly authorized by way of resolution of the company, then the very claim was not sustainable in the eyes of law. There is also another painful aspect in the matter. Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 12 of 13 Arbt.Ptn.No.944/2012: "Prabhakar Kr. Shaw V/s N.C Vijai Ragavan" DOD: 18.05.2013 The petitioner is also prima facie guilty of committing fraud upon this Court. The petitioner in para 4 of the petition has stated that by August' 2008 he had paid 19 instalments and in respect of his claim he has filed on record photocopies of the receipts. On 14.01.2013, the petitioner was orally directed by this Court to bring the original of the said receipts. On that day, petitioner undertook to produce the said receipts in court on the next date of hearing, however, he did not bring the said receipts and instead submitted a copy of police report, showing the misplacement of said receipts. Be that at it may, the issue with regard to the forgery of the receipts is already the subject matter of a criminal complaint case filed by Respondent No.2 against the petitioner and therefore, I would refrain from expressing my opinion thereupon.
18. In view of the above discussion, the Award dated 24.11.2011, passed by Respondent No.1 in the matter is not sustainable in the eyes of law and the same is accordingly set aside, leaving the parties to bear their own costs.
19. File be consigned to Record Room.
Dictated & Announced in the (Vinod Yadav)
open Court on 18.05.2013 Addl. District JudgeI/SouthWest
Dwarka District Courts: New Delhi
Ptn.U/s 34 of A&C Act, 1996: "Petition Allowed & Arbitration Award Set Aside" Page 13 of 13